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Reputation, Competition, and Entry in Procurement

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  • Spagnolo, Giancarlo

    ()
    (Stockholm Institute of Transition Economics)

Abstract

Based on my recent work with several co-authors this paper explores the relationship between discretion, reputation, competition and entry in procurement markets. I focus especially on public procurement, which is highly regulated for accountability and trade reasons. In Europe regulation constrains the use of past performance information to select contractors while in the US its use is encouraged. I present some novel evidence on the benefits of allowing buyers to use reputational indicators based on past performance and discuss the complementary roles of discretion and restricted competition in reinforcing relational/reputational forces, both in theory and in a new empirical study on the effects restricted rather than open auctions. I conclude reporting preliminary results form a laboratory experiment showing that reputational mechanisms can be designed to stimulate rather than hindering new entry.

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File URL: http://swopec.hhs.se/hasite/papers/hasite0014.pdf
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Bibliographic Info

Paper provided by Stockholm Institute of Transition Economics, Stockholm School of Economics in its series SITE Working Paper Series with number 14.

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Length: 16 pages
Date of creation: 07 Jan 2012
Date of revision:
Handle: RePEc:hhs:hasite:0014

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Postal: Stockholm Institute of Transition Economics, Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Phone: (+46 8) 736 9670
Fax: (+46 8) 31 64 22
Web page: http://www.hhs.se/site/
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Keywords: Accountability; Discretion; Entry; Incomplete contracts; Limited enforcement; Past performance; Procurement; Quality; Relational contracts; Reputation; Restricted auctions.;

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References

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  1. Iossa, Elisabetta & Rey, Patrick, 2012. "Building Reputation for Contract Renewal: Implications for Performance Dynamics and Contract Duration," TSE Working Papers, Toulouse School of Economics (TSE) 12-368, Toulouse School of Economics (TSE).
  2. Oriana Bandiera & Andrea Prat & Tommaso Valletti, 2008. "Active and Passive Waste in Government Spending: Evidence from a Policy Experiment," CEIS Research Paper, Tor Vergata University, CEIS 115, Tor Vergata University, CEIS, revised 14 Jul 2008.
  3. Calzolari, Giacomo & Spagnolo, Giancarlo, 2009. "Relational Contracts and Competitive Screening," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7434, C.E.P.R. Discussion Papers.
  4. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 89(4), pages 615-41, August.
  5. Abhijit V. Banerjee & Esther Duflo, 2000. "Reputation Effects And The Limits Of Contracting: A Study Of The Indian Software Industry," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 115(3), pages 989-1017, August.
  6. Shapiro, Carl, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(4), pages 659-79, November.
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Cited by:
  1. Elisabetta Iossa & Patrick Rey, 2014. "Building Reputation For Contract Renewal: Implications For Performance Dynamics And Contract Duration," Journal of the European Economic Association, European Economic Association, European Economic Association, vol. 12(3), pages 549-574, 06.
  2. Author-Name: Luca Di Corato & Cesare Dosi & Michele Moretto, 2014. "Bidding for Conservation Contracts," Working Papers, Fondazione Eni Enrico Mattei 2014.65, Fondazione Eni Enrico Mattei.
  3. Bergman, Mats & Johansson, Per & Lundberg, Sofia & Spagnolo, Giancarlo, 2014. "Privatization and Quality: Evidence from Elderly Care in Sweden," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9939, C.E.P.R. Discussion Papers.
  4. Spagnolo, Giancarlo & Bergman, Mats A. & Lundberg, Sofia, 2012. "Privatization and Quality: Evidence from Elderly Care in Sweden," SITE Working Paper Series, Stockholm Institute of Transition Economics, Stockholm School of Economics 19, Stockholm Institute of Transition Economics, Stockholm School of Economics.
  5. Luigi Moretti & Paola Valbonesi, 2012. "Subcontracting in Public Procurement: An Empirical Investigation," "Marco Fanno" Working Papers, Dipartimento di Scienze Economiche "Marco Fanno" 0154, Dipartimento di Scienze Economiche "Marco Fanno".

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